Awards of bankruptcy
Bankruptcy (also known as sequestration in Scotland) is a legal declaration that a person cannot pay their debts. If a person is declared bankrupt, control of some things that they own are passed to a trustee who may sell them to pay money owed to creditors. Awards of bankruptcy can be grouped into three types:
- debtor application
- creditor petition
- trust deed petition
Further information on bankruptcy can be found in the Guide to Bankruptcy section.
There were 621 bankruptcies awarded in 2023-24 Q3, an increase of 6.5% when compared with 2022-23 Q3.
Of the 621 awards of bankruptcy, 80.4% came from debtor applications. The remaining bankruptcies came from creditor petitions (19.6%). There were no trust deed petitions in 2023-24 Q3.
Creditor petitions increased from 93 in 2022-23 Q3 to 122 in 2023-24 Q3. Note petitions are approved by courts with AiB only recording when a petition has been awarded. So, the number of creditor petitions recorded could be influenced by the late reporting of creditor petitions court orders. Under the current revisions policy, quarterly creditor petitions figures are revised quarterly to account for late reporting or missing cases.
Emergency and permanent measures
The emergency Coronavirus Acts introduced to aid in the response to the COVID-19 pandemic as well further legislation such as:
- The Coronavirus (Recovery and Reform) (Scotland) Act
- The Bankruptcy (Miscellaneous Amendments) (Scotland) Regulations 2021
- The Bankruptcy and Debt Arrangement Scheme (Miscellaneous Amendment) Regulations 2023
included temporary and permanent measures which impact on statutory debt solutions legislation in Scotland.
Some of the changes include:
- improved access to Minimal Asset Process (MAP) bankruptcy by removing the lower debt threshold completely and increasing the upper threshold to £25,000
- removal of student loan debt contributing to MAP eligibility
- removal of debtor application fees for those assessed as having no surplus income or being in receipt of prescribed benefits
- increasing the deposit paid by creditors from £300 to £750 where AiB is trustee in a creditor petition bankruptcy
- the electronic delivery of documents
- remote meetings of creditors in bankruptcy proceedings
- the amendment to the debt level for creditor petitions from £3,000 to £5,000
Further information is detailed in the Legislation section.
Debtor applications for bankruptcy increased by 1.8% from 490 in 2022-23 Q3 to 499 in 2023-24 Q3. There are two types of debtor applications for bankruptcy: MAP or Full Administration. Full Administration bankruptcies decreased by 12.8% from 148 to 129. MAP bankruptcies increased by 8.2% from 342 to 370. The majority of bankruptcies awarded through debtor applications are MAP cases.
Chart 3 shows the recent trend in bankruptcies awarded through debtor applications since April to June 2009. The total awards of debtor applications in 2022-23 decreased by 21.9% when compared with 2015-16.
Not all debtor applications for bankruptcy result in an award being made. Applications can be:
- rejected (criteria for bankruptcy not met)
- returned (application errors)
74.1% of debtor applications awarded in 2023-24 were MAP
Chart 3: Awards of debtor applications by type of bankruptcies: Apr-Jun 2009 to Oct-Dec 2023
In Scotland, a trustee is appointed to administer each bankruptcy. The Accountant in Bankruptcy (The Accountant) will be the trustee unless an insolvency practitioner is nominated to act. In all cases awarded under MAP, The Accountant must act as trustee.
In the third quarter of 2023-24, The Accountant was appointed trustee in 540 cases awarded. This is 87.0% of bankruptcies for the quarter. This is because 74.1% of bankruptcies awarded through debtor applications in this quarter are MAP cases.
Application fee structure
The current bankruptcy application fee structure provides lower cost access to both the Full Administration and MAP routes to bankruptcy. It included the complete removal of fees for those assessed as having no surplus income and those in receipt of certain prescribed benefits. Debtor application costs for Full Administration have reduced from £200 to £150 and MAP application fees have been removed completely. Some changes were only introduced on 6 February 2023. See the Legislation section for more detailed information on the changes.
In the third quarter of 2023-24, a total of 499 bankruptcy awards were made following applications submitted to AiB under the revised fee structure. Of this total, 474 (95.0%) applicants were not required to pay any fee at all. 80.6% of Full Administration bankruptcies paid no fee in 2023-24 Q3. Due to the legislation changes 100% of MAP cases paid no fee in 2023-24 Q3.
A debtor in a full administration bankruptcy will normally be bankrupt for one year. After this period they may be discharged. A debtor in a MAP bankruptcy will normally be discharged after six months as long as they continue to meet the MAP criteria.
Although the debtor is discharged, the administration of the bankruptcy continues until the trustee has dealt with all of the estate and accounted for their work so that they can seek their own discharge. A debtor must continue to cooperate with the trustee until the trustee’s discharge.
In 2023-24 Q3, there were 629 debtors discharged and 842 trustees discharged, an increase of 2.3% and 23.5% respectively when compared with 2022-23 Q3.
Figures on the number of trustee discharges contain some bankruptcy cases where the trustee has been discharged on more than one occasion. This is following formal re-appointment to conclude the administration of the bankruptcy. The figures also include the number of trustees who formerly acted in bankruptcies on which recall has been granted. In 2022-23 and 2023-24, there were 48 and 41 bankruptcy recalls respectively.
- First published
- Wednesday, 24 January 2024
- Last updated
- Wednesday, 24 January 2024
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